A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $1,000 face value,

Question:

A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $1,000 face value, and is 10 years from maturity. (LG 3-4)

a. If the required rate of return on the bond is 6 percent, what is its fair present value?

b. If the required rate of return on the bond is 8 percent, what is its fair present value?

c. What do your answers to parts

(a) and

(b) say about the relation between required rates of return and fair values of bonds?

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